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The international transmission of monetary shocks in a dollarized economy: The case of USA and Lebanon

Author

Listed:
  • Charbel Cordahi

    (Université Saint Esprit de Kaslik (USEK), Kaslik)

  • Jean-François Goux

    (GATE CNRS)

Abstract

We show that an American monetary shock wields an influence, though limited, over the Lebanese output in accordance with the literature advances. However, as we are waiting for a stronger transmission of U.S. short-term rates to Lebanese short-term rates, we notice that this transmission is weak in the first year. The result can be explained by the presence of pricing-to-market. After the end of the first year, we find the traditional result where the increase in the American interest rate is transmitted integrally to the Lebanese interest rate. We recognize this phenomenon as the dollarization effect.

Suggested Citation

  • Charbel Cordahi & Jean-François Goux, 2007. "The international transmission of monetary shocks in a dollarized economy: The case of USA and Lebanon," Working Papers 0715, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:0715
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    Citations

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    Cited by:

    1. Ms. Nombulelo Braiton, 2011. "Dollarization in Cambodia: Causes and Policy Implications," IMF Working Papers 2011/049, International Monetary Fund.
    2. Layal Mansour, 2014. "The Power of International Reserves: the impossible trinity becomes possible," Working Papers halshs-01054614, HAL.
    3. Alper ASLAN, 2010. "The validity of PPP: evidence from Lagrange multiplier unit root tests for ASEAN countries," Economics Bulletin, AccessEcon, vol. 30(2), pages 1433-1443.
    4. Kepa Astorkiza & Ikerne del Valle, 2013. "Changing the Total Allowable Catch (TAC) Decision-Making Framework: A Central Bank of Fishes?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 415-431, May.
    5. Marina Tkalec, 2013. "Monetary Determinants of Deposit Euroization in European Post-Transition Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(1), pages 89-101, March.

    More about this item

    Keywords

    interest rate - International transmission - law of one price - monetary shock - purchasing power parity;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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